Credit Score Facts & Myths

A credit score is a number assigned to a person that tells lenders what their capacity is to pay back a loan. This special number determines if you qualify for the best credit cards or even if you’re capable of renting an apartment. Having a healthy credit score is vital to your financial well-being, so knowing what will and won’t affect it goes a long way.

Facts vs. Myths - What Actually Affects My Credit Score?

Don’t get tricked by credit score misconceptions and misinformation. Get the facts here.

Applying for lots of credit cards – Fact

Yes, having a credit card and paying the balance every month does help build your credit score. Yet, opening lots of credit cards, especially in a short amount of time, does not. In addition, closing a credit card does not improve your credit score either.

Inquiries from potential employers – Myth

Having a potential employer look at your credit record will not hurt your credit score. Don’t worry, though, you have to sign a consent form before they pull the information.

Checking your credit score frequently – Myth

You can do a free “soft pull” to check your credit score up to three times every year, one from each credit reporting agency: Equifax, Experian, and TransUnion. In fact, it’s encouraged to do these credit checks to ensure your credit report is accurate.

Soon-to-be-ex’s credit card debt – Fact

Just because the ex is out of your life, doesn’t mean their debt is gone too. If your name was also attached to the account, then you’re still responsible for the debt. When you completely cut ties, make sure to do so financially as well.

Unpaid bills, late payments – Fact

The point of a credit score is to tell lenders whether you can make a loan payment. If you’re missing bills, this dings your credit score, potentially lowering it.

Unpaid parking or traffic tickets – Myth

Unlike bills, unpaid parking or traffic tickets, and even library fines, don’t affect your credit score. These come from municipal records, which are not reported to the credit bureau. However, it is still important to pay these because after too much time passed they can go to collections, which would affect your credit score.

Disqualified from ALL credit cards with low credit score – Myth

Just because you have a low credit score doesn’t mean you’re doomed. There are other options, you just won’t get the exclusive platinum card. When you apply for a credit card, make sure you have a repayment plan so you don’t hurt your credit score more with missed payments.

Carrying a balance on a credit card – Myth

Keeping a balance on a credit card does not help your credit score. Instead, every month you’re paying more interest from the amount that is left on the balance. All this does is boost how much you’re spending for the next month.

Student loans affect my credit score – Fact

Correct. Like your credit card bill, your student loans need to be paid on time every month. This will keep your credit score in check and prove you can handle debt. The only time missing a payment doesn’t affect your credit score is if they are in deferment or forbearance, like the recent government-issued time period.

You’re rich if you have a good credit score – Myth

You don’t have to be rich to have a good credit score, you just need to be responsible. Fiscal responsibility is what takes to have a good credit score. So stay on top of your bills, especially your credit card bills.

If you have more questions, contact your local credit union. Or, check out this online course covering everything you need to know about building financial stability.